Updated · May 20, 2022
Coinbase Stock Slumps Following $430 Million Loss
Updated · May 11, 2022
The company reported its Q1 earnings on Tuesday.
Figures Miss Analyst Estimates
Coinbase reported that it incurred a net loss of $430 million in the first quarter of the year. This is the first time that it has posted a loss as a publicly-traded company. Coinbase is one of the biggest cryptocurrency exchanges in the world in terms of trading volume.
In the first quarter, the platform saw its revenues dropping off by 27% to $1.17 billion. This is in contrast to the $1.6 billion that it raked in in the first quarter of 2021. By 2021 Q4, that figure had grown to $2.5 billion. Analysts had projected revenues of $1.5 billion.
The slump in revenue followed a period where volumes slowed down. In the first quarter, the platform had 9.2 million monthly transacting users. This is a loss of 2.2 million users when compared to the previous quarter.
Consequently, Coinbase reported a trading volume of $309 billion for the first quarter of the year compared to $547 billion for the previous quarter.
The platform’s shares plummeted by over 15% in extended trading on Tuesday following the report.
“Present Conditions are Temporary”
In spite of the disappointing quarterly results, Coinbase remains confident of a reversal in the future. It captured this in its letter to shareholders:
“We believe these market conditions are not permanent and we remain focused on the long-term. In fact, our investment in our business now is especially critical.”
The company went on to add that it will look to tweak its business model “in these periods of low volatility” to focus on more on product development. That is, as opposed to efforts to meet high demands that it followed in peak periods.
The letter pointed to several factors, among them its beta launch of an NFT marketplace, as signs of progress.
In an earnings call, CEO Brian Armstrong reiterated that narrative. He said that he has “never been more bullish” on the company’s position.
Daniel is an Economics grad who fell in love with tech. His love for books and reading pushed him into picking up the pen - and keyboard. Also a data analyst, he's taking that leap into data science and machine learning. When not writing or studying, chances are that you'll catch him watching football or face-deep in an epic fantasy novel.
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